Equity Trust Lawsuit

[Jon Crosby]

Greetings All, 

I was recently made aware of a class action lawsuit against Equity Trust (see link here) to which one of the more disturbing claims is, that if found guilty they would essentially be considered a NON-qualified retirement vehicle and potentially any investments or rollovers into ETC could be then considered a tax-able event.  

Before I go losing sleep on this thing, does anyone have any other info or professional legal interpretation of this suit and offer any insights? 

Thanks in advance! 

https://trustetc.com/jacobs-complaint

[Ryan Seib]

Originally posted by @Jon Crosby:

Hey @Ryan Seib, thanks so much for the response.  Below is the snippet that had me concerned.  Page 36 of the document.  I believe I read that it would disqualify funds invested any date in the calendar year of the disqualification event...or something like that.   :)

Thanks aggain

Yes I had seen that page as what you were referring to. The first point to realize is that this is a lawsuit brought before a district court, not before the IRS or SEC. Therefore it might be the case that these administrative entities (which are in charge of such classifications for such account) may not agree with the assertions of the plaintiffs. The government is a multivalent group of separate entities in this sense. So even if a court ruled that ET was not properly set up so as to expose investors to potential taxes, that may not actually be the position of the IRS when tax time comes. The IRS may allow the investor the tax treatment the investor had a reasonable expectation of receiving in light of due diligence. Next realize that the page you posted contains merely assertions from the plaintiff's point of view. In other words the claim is something like 'Equity Trust failed to properly set up these accounts, thus exposing us to potential (not actual) taxes'. So the lawsuit plaintiffs are not necessarily saying these taxation events have or will occur, but that they could, because ET failed to meet certain requirements. This is a serious charge nonetheless. But it is only an assertion at this point. I did not comb the lawsuit for details but I do not recall an assertion that such taxation had occurred or was inevitable. Therefore the damages are primarily against the fiduciary status of ET, not necessarily monetary remuneration. Have you brought this concern before any IRA experts who are familiar with the current IRS position on ETs accounts? Either way you should keep your eyes open on the suit's progress in case you need to take part in the settlement proceeds...